In finance, hybrid securities are those securities which have both the qualities of debt and equity shares. These securities can hybrid because it can easily convert into equity shares and its return on investment can easily be calculated in advance.
Examples of Hybrid Securities
1st : Preference shares are hybrid securities because its dividend is fixed and not affected with the current earning of company.
2nd : Convertible debentures are also hybrid securities because these debentures can be coverted after a certain time period.
Types of Hybrid Securities
1st : Traditional Hybrid Securities :
These securities are issued on the condition that on conversion time, one hybrid security will convert into one equity share.
2nd : Modern Hybrid Securities :
These securities can be converted in to shares up to 5% discount, All convertible bonds are like modern hybrid securities.
3rd : Basket D securities :
Basket D securities are the wonderful hybrid financial instrument which is mixture of 75% equity share and 25% debt.